Question

A retailer buys an article for Rs. 800 and pays the GST at the rate of 18%. The retailer sells the same article to a customer for Rs. 1,000 and charged GST at the same rate. Find :

(i) the price paid by customer to buy this article.

(ii) the amount of GST paid by retailer.

Answer 1

Step 1: Given information:

Cost of article$=\mathrm{Rs}.800$

Selling price of same article$=\mathrm{Rs}.1,000$

Rate of GST charged$=18\%$

Step 2: The price paid by the customer:

The selling price of the article $=\mathrm{Rs}.1,000$

Calculate the GST on selling price.

$\begin{array}{rcl}\mathrm{GST}& =& 1000\times \frac{18}{100}\\ \therefore \mathrm{GST}& =& \mathrm{Rs}.180\end{array}$

Calculate the price paid by the customer.

$\begin{array}{rcl}\mathrm{Price}\mathrm{paid}\mathrm{by}\mathrm{the}\mathrm{customer}& =& \mathrm{selling}\mathrm{price}+\mathrm{GST}\\ & =& 1,000+180\\ & =& \mathrm{Rs}.1,180\end{array}$

Step 3: GST paid by the retailer:

The cost price of the article $=\mathrm{Rs}.800$

Calculate the GST on cost price.

$\begin{array}{rcl}\mathrm{Tax}\mathrm{paid}& =& 800\times \frac{18}{100}\\ \therefore \mathrm{Tax}\mathrm{paid}& =& \mathrm{Rs}.144\end{array}$

The selling price of the article $=\mathrm{Rs}.1,000$

Calculate the GST on selling price.

$\begin{array}{rcl}\mathrm{Tax}\mathrm{paid}& =& 1000\times \frac{18}{100}\\ \therefore \mathrm{Tax}\mathrm{paid}& =& \mathrm{Rs}.180\end{array}$

Calculate the GST paid by the retailer.

$$\begin{gathered} \mathrm{GST}=\mathrm{Tax}\mathrm{recovered}\mathrm{on}\mathrm{sale}-\mathrm{Tax}\mathrm{paid}\mathrm{on}\mathrm{purchase} \\ =180-144 \\ =\mathrm{Rs}.36 \end{gathered}$$

Hence, the price paid by the customer to buy this article is $\mathrm{Rs}.1,180$. And, the amount of GST paid by the retailer is $\mathrm{Rs}.36$.